Document


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): October 24, 2019
EHEALTH, INC.
(Exact Name of Registrant as Specified in its Charter)

 
 
 
Delaware
001-33071
56-2357876
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)

2625 AUGUSTINE DRIVE, SECOND FLOOR
SANTA CLARA, CALIFORNIA, 95054
(Address of principal executive offices)    (Zip Code)

(650) 584-2700
(Registrant’s telephone number, including area code)

Not applicable
(Former name or former address, if changed since last report.)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, par value $0.001 per share
 
EHTH
 
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company  ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
 
 





Item 2.02
 
Results of Operations and Financial Condition.

On October 24, 2019, eHealth, Inc. (the “Company”) issued a press release announcing its financial results for the third quarter ended September 30, 2019. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

On October 24, 2019, the Company posted supplemental investor materials on its investor relations webpage at http://ir.ehealthinsurance.com. The Company intends to use its investor relations webpage as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. A copy of the supplemental investor materials is also furnished as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference. The Company does not intend to disclose slides 10 through 12 of these supplemental investor materials in the future, and undertakes no obligation to provide any updates with regard to the information presented therein.

The information in Item 2.02 of this Current Report on Form 8-K and the exhibits attached hereto are intended to be “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Except as shall be expressly set forth by specific reference in such filing, the information contained herein and in the accompanying exhibits shall not be incorporated by reference into any filing with the Securities and Exchange Commission made by the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Item 9.01
 
 Financial Statements and Exhibits.

(d)    Exhibits

Exhibit No.
Description
99.1
99.2







SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
 
 
eHealth, Inc.
Date:
October 24, 2019
/s/ Derek N. Yung
 
 
Derek N. Yung
Chief Financial Officer
(Principal Financial Officer)






Exhibit



Exhibit 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13161808&doc=4
eHealth, Inc. Announces Third Quarter 2019 Results

Third Quarter 2019 Overview

Revenue for the third quarter of 2019 was $69.9 million, a 72% increase compared to $40.8 million for the third quarter of 2018.
GAAP net loss for the third quarter of 2019 was $11.0 million compared to net loss of $9.0 million for the third quarter of 2018.
Adjusted EBITDA was $(18.8) million for the third quarter of 2019 compared to $(6.9) million for the third quarter of 2018.
Net cash used in operating activities for the third quarter of 2019 was $15.9 million compared to $4.9 million for the third quarter of 2018.

SANTA CLARA, California — October 24, 2019eHealth, Inc. (NASDAQ: EHTH), a leading private online health insurance exchange, announces today its financial results for the third quarter ended September 30, 2019.

Scott Flanders, chief executive officer of eHealth stated, "Strong momentum in our business continued with another quarter of meaningful outperformance against our expectations. Our third quarter results reflect strong revenue and enrollment growth in our Medicare and Individual & Family Plan businesses and a significant investment in our telesales capacity ahead of the Medicare Annual Enrollment Period (AEP).  We have entered this AEP from a position of strength, allowing us to recently guide up to the high end of our 2019 revenue and adjusted EBITDA forecast based on the quality and scale of call center resources in place, the acceleration of our online enrollments and strength of consumer demand."

GAAP — Third Quarter of 2019 Results

Revenue — Revenue for the third quarter of 2019 totaled $69.9 million, a 72% increase compared to $40.8 million for the third quarter of 2018. Commission revenue for the third quarter of 2019 totaled $59.8 million, a 78% increase compared to $33.6 million for the third quarter of 2018. Other revenue for the third quarter of 2019 was $10.2 million, a 42% increase compared to $7.1 million for the third quarter of 2018.

Revenue from our Medicare segment was $57.2 million for the third quarter of 2019, a 75% increase compared to $32.7 million for the third quarter of 2018. Revenue from our Individual, Family and Small Business segment was $12.7 million for the third quarter of 2019, a 59% increase compared to $8.0 million for the third quarter of 2018.

Loss from Operations — Loss from operations for the third quarter of 2019 was $20.2 million compared to loss from operations of $15.5 million for the third quarter of 2018. Operating margin was (29)% for the third quarter of 2019 compared to (38)% for the third quarter of 2018.

Pre-tax Loss — Pre-tax loss for the third quarter of 2019 was $19.7 million compared to pre-tax loss of $15.2 million for the third quarter of 2018.

Benefit from Income Taxes — Benefit from income taxes for the third quarter of 2019 was $8.6 million compared to benefit from income taxes of $6.2 million for the third quarter of 2018.

Net Loss — Net loss for the third quarter of 2019 was $11.0 million, or $0.47 net loss per diluted share, compared to net loss of $9.0 million, or $0.47 net loss per diluted share, for the third quarter of 2018. Net loss for the third quarter of 2019 included a non-cash gain of $5.4 million related to a decrease in fair value of the earnout liability assumed in connection with eHealth’s acquisition of GoMedigap. The decrease was driven primarily by eHealth’s share price decline during the quarter. The share price depreciation has decreased the value of the equity-based portion of the earnout consideration owed to the former holders of GoMedigap equity interests.







Segment Profit (Loss) — Loss from our Medicare segment was $11.0 million for the third quarter of 2019, compared to a profit of $0.5 million for the third quarter of 2018. Profit from our Individual, Family and Small Business segment was $3.8 million for the third quarter of 2019, compared to a loss of $0.6 million for the third quarter of 2018.

Non-GAAP — Third Quarter of 2019 Results

Non-GAAP Operating Loss & Non-GAAP Net Loss — Non-GAAP operating loss for the third quarter of 2019 was $19.6 million, compared to non-GAAP operating loss of $7.6 million for the third quarter of 2018. Non-GAAP operating margin was (28)% for the third quarter of 2019, compared to (19)% for the third quarter of 2018. Non-GAAP net loss for the third quarter of 2019 was $10.1 million, or $0.43 non-GAAP net loss per diluted share, compared to non-GAAP net loss of $4.2 million, or $0.22 non-GAAP net loss per diluted share, for the third quarter of 2018.

Non-GAAP operating loss and non-GAAP operating margin for the third quarter of 2019 are calculated by excluding $5.5 million of stock-based compensation expense, a $5.4 million gain related to the change in fair value of earnout liability related to our acquisition of GoMedigap, and $0.5 million of amortization of intangible assets from GAAP net operating loss and GAAP operating margin. Non-GAAP net loss and non-GAAP net loss per diluted share for the third quarter of 2019 are calculated by excluding $5.5 million of stock-based compensation expense, $5.4 million of gain related to the change in fair value of earnout liability related to our acquisition of GoMedigap, $0.5 million of amortization of intangible assets and $0.3 million of the income tax effect of these non-GAAP adjustments from GAAP net loss and GAAP net loss per diluted share. Non-GAAP operating loss and non-GAAP operating margin for the third quarter of 2018 are calculated by excluding $3.5 million of stock-based compensation expense, $3.8 million expense for change in fair value of earnout liability related to our acquisition of GoMedigap, and $0.5 million of amortization of intangible assets from GAAP net operating loss and GAAP operating margin. Non-GAAP net loss and non-GAAP net loss per diluted share for the third quarter of 2018 are calculated by excluding $3.5 million of stock-based compensation expense, $3.8 million expense for change in fair value of earnout liability related to our acquisition of GoMedigap, $0.5 million of amortization of intangible assets, and $3.1 million of the income tax effect of these non-GAAP adjustments from GAAP net loss and GAAP net loss per diluted share.

Adjusted EBITDA — Adjusted EBITDA was $(18.8) million for the third quarter of 2019 compared to $(6.9) million for the third quarter of 2018. Adjusted EBITDA is calculated by adding stock-based compensation, change in fair value of earnout liability related to our acquisition of GoMedigap, depreciation and amortization expense, acquisition costs, restructuring charges, amortization of intangible assets, other income, net, and benefit from income taxes to GAAP net loss.

Submitted Applications, Approved Members and Estimated Membership

Submitted Applications — The number of submitted applications for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans, was 56,436 in the third quarter of 2019, a 66% increase compared to 33,902 in the third quarter of 2018. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform increased from 9% for the third quarter of 2018 to 21% for the third quarter of 2019. The number of submitted applications for major medical Individual and Family plan products increased     by 163% in the third quarter of 2019 to 4,379 compared to 1,662 in the third quarter of 2018.

Approved Members — The number of approved members for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans, was 51,214 in the third quarter of 2019, a 70% increase compared to 30,160 in the third quarter of 2018. The number of approved members for major medical individual and family plan products increased by 76% in the third quarter of 2019 to 3,187 compared to 1,810 in the third quarter of 2018.

Estimated Membership — Total estimated membership as of September 30, 2019 was 991,204, a 12% increase compared to the 887,808 estimated members we reported as of September 30, 2018. Estimated Medicare membership as of September 30, 2019 was 551,068, a 34% increase compared to the 409,888 estimated members we reported as of September 30, 2018. Estimated major medical individual and family plan membership as of September 30, 2019 was 131,058, a 19% decrease compared to the 161,371 estimated members we reported as of September 30, 2018.

Cash — Third Quarter of 2019

Cash Flows — Net cash used in operating activities was $15.9 million for the third quarter of 2019, compared to net cash used in operating activities of $4.9 million for the third quarter of 2018.







GAAP — Year-to-Date Results

Revenue — Revenue for the nine months ended September 30, 2019 totaled $204.5 million, a 76% increase compared to $116.5 million for the nine months ended September 30, 2018. Commission revenue for the nine months ended September 30, 2019 totaled $184.6 million, a 76% increase compared to $105.0 million for the nine months ended September 30, 2018. Other revenue for the nine months ended September 30, 2019 was $19.9 million, a 72% increase compared to $11.5 million for the nine months ended September 30, 2018.

Revenue from our Medicare segment was $164.4 million for the nine months ended September 30, 2019, an 85% increase compared to $89.0 million for the nine months ended September 30, 2018. Revenue from our Individual, Family and Small Business segment was $40.1 million for the nine months ended September 30, 2019, a 46% increase compared to $27.5 million for the nine months ended September 30, 2018.

Loss from Operations — Loss from operations for the nine months ended September 30, 2019 was $41.7 million compared to loss from operations of $39.1 million for the nine months ended September 30, 2018. Operating margin was (20)% for the nine months ended September 30, 2019 compared to (34)% for the nine months ended September 30, 2018.

Pre-tax Loss — Pre-tax loss for the nine months ended September 30, 2019 was $39.9 million compared to pre-tax loss of $38.3 million for the nine months ended September 30, 2018.

Benefit from Income Taxes — Benefit from income taxes for the nine months ended September 30, 2019 was $18.0 million compared to benefit from income taxes of $12.5 million for the nine months ended September 30, 2018.

Net Loss — Net loss for the nine months ended September 30, 2019 was $21.9 million, or $0.96 net loss per diluted share, compared to net loss of $25.8 million, or $1.36 net loss per diluted share, for the nine months ended September 30, 2018. Net loss for the nine months ended September 30, 2019 included a non-cash charge of $15.1 million related to an increase in fair value of the earnout liability assumed in connection with eHealth’s acquisition of GoMedigap. The increase was driven primarily by eHealth’s share price appreciation. The share price appreciation has increased the value of the equity-based portion of the earnout consideration owed to the former holders of GoMedigap equity interests.

Segment Profit — Profit from our Medicare segment was $5.9 million for the nine months ended September 30, 2019, a 172% increase compared to profit of $2.2 million for the nine months ended September 30, 2018. Profit from our Individual, Family and Small Business segment was $15.0 million for the nine months ended September 30, 2019, a 556% increase compared to profit of $2.3 million for the nine months ended September 30, 2018.

Non-GAAP — Year-to-Date Results

Non-GAAP Operating Loss & Non-GAAP Net Loss — Non-GAAP operating loss for the nine months ended September 30, 2019 was $11.6 million compared to non-GAAP operating loss of $20.1 million for the nine months ended September 30, 2018. Non-GAAP operating margin was (6)% for the nine months ended September 30, 2019, compared to (17)% for the nine months ended September 30, 2018. Non-GAAP net loss for the nine months ended September 30, 2019 was $0.6 million, or $0.02 non-GAAP net loss per diluted share, compared to non-GAAP net loss of $13.0 million, or $0.68 non-GAAP net loss per diluted share, for the nine months ended September 30, 2018.

Non-GAAP operating loss and non-GAAP operating margin for the nine months ended September 30, 2019 are calculated by excluding $13.4 million of stock-based compensation expense, $15.1 million of expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, and $1.6 million of amortization of intangible assets from GAAP operating loss and GAAP operating margin. Non-GAAP net loss and non-GAAP net loss per diluted share for the nine months ended September 30, 2019 are calculated by excluding $13.4 million of stock-based compensation expense, $15.1 million of expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, $1.6 million of amortization of intangible assets and $8.8 million of the income tax effect of these non-GAAP adjustments from GAAP net loss and GAAP net loss per share. Non-GAAP operating loss and non-GAAP operating margin for the nine months ended September 30, 2018 are calculated by excluding $9.2 million of stock-based compensation expense, $6.3 million of expense for change in fair value of earnout liability, $1.9 million of restructuring charges, $1.5 million of amortization of intangible assets and $0.1 million of acquisition costs related to our acquisition of GoMedigap from GAAP net operating loss and GAAP operating margin. Non-GAAP net loss and non-GAAP net loss per diluted share for the nine months ended September 30, 2018 are calculated by excluding $9.2 million of stock-based compensation expense, $6.3 million of expense for change in fair value of earnout liability, $1.9 million of restructuring charges, $1.5 million of amortization of intangible assets, $0.1 million of acquisition






costs related to our acquisition of GoMedigap, and $6.2 million of the income tax effect of these non-GAAP adjustments from GAAP net loss and GAAP net loss per diluted share.

Adjusted EBITDA — Adjusted EBITDA was $(9.4) million for the nine months ended September 30, 2019 compared to $(18.2) million for the nine months ended September 30, 2018. Adjusted EBITDA is calculated by adding stock-based compensation, change in fair value of earnout liability related to our acquisition of GoMedigap, depreciation and amortization expense, acquisition costs, restructuring charges, amortization of intangible assets, other income, net and benefit from income taxes to GAAP net loss.

Submitted Applications and Approved Members

Submitted Applications — The number of submitted applications for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans was 176,770 applications in the nine months ended September 30, 2019, a 72% increase compared to 102,687 in the nine months ended September 30, 2018. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform increased from 8% for the nine months ended September 30, 2018 to 15% for the nine months ended September 30, 2019. The number of submitted applications for major medical individual and family plan products increased by 12% in the nine months ended September 30, 2019 to 11,877 compared to 10,578 in the nine months ended September 30, 2018.

Approved Members — The number of approved members for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans, was 161,682 in the nine months ended September 30, 2019, a 72% increase compared to 93,999 in the nine months ended September 30, 2018. The number of approved members for major medical individual and family plan products decreased by 37% in the nine months ended September 30, 2019 to 17,639 compared to 28,198 in the nine months ended September 30, 2018.

Cash — Year-to-Date Results

Cash Flows — Net cash used in operating activities was $14.7 million for the nine months ended September 30, 2019 compared to net cash provided by operating activities of $5.5 million for the nine months ended September 30, 2018.

2019 Guidance

Based on information available as of October 24, 2019, eHealth is reaffirming its guidance for total revenue and adjusted EBITDA for the full year ending December 31, 2019, and updating its guidance for certain GAAP and non-GAAP measures for the full year ending December 31, 2019 due to the third quarter of 2019 reduction in fair value of the earnout liability assumed in connection with eHealth's acquisition of GoMedigap and a change in income tax rate. These expectations are forward-looking statements and eHealth assumes no obligation to update these statements. Actual results may be materially different and are affected by the risk factors and uncertainties identified in this press release and in eHealth’s annual and quarterly filings with the Securities and Exchange Commission.

The following guidance is for the full year ending December 31, 2019:

Consistent with our prior guidance,

Total revenue is expected to be in the range of $365.0 million to $385.0 million. Revenue from the Medicare segment is expected to be in the range of $318.0 million to $333.0 million. Revenue from the Individual, Family and Small Business segment is expected to be in the range of $47.0 million to $52.0 million.

Adjusted EBITDA(a) is expected to be in the range of $65.0 million to $70.0 million.

2019 Medicare segment profit(b) is expected to be in the range of $96.0 million to $99.0 million, and Individual, Family and Small Business segment profit is expected to be in the range of $10.0 million to $12.0 million.

Corporate(c) shared service expenses, excluding stock-based compensation and depreciation and amortization expense, is expected to be approximately $41.0 million.

Cash used in operations is expected to be in the range of $50.0 million to $55.0 million, and cash used for capital expenditures is expected to be $15.0 million to $17.0 million.







Updated guidance for the full year ending December 31, 2019 due to the third quarter of 2019 reduction in fair value of the earnout liability assumed in connection with our acquisition of GoMedigap during the third quarter of 2019 and a change in income tax rate:

Assuming the impact of the non-cash charge related to the fair value of the earnout liability in connection with our acquisition of GoMedigap remains at $15.1 million, we expect GAAP net income for 2019 to be in the range of $20.9 million to $25.9 million.

Assuming the impact of the non-cash charge related to the fair value of the earnout liability in connection with our acquisition of GoMedigap remains at $0.60 per diluted share, GAAP net income per diluted share for 2019 is expected to be in the range of $0.83 to $1.03 per share.

Assuming the impact of the non-cash charge related to the fair value of the earnout liability in connection with our acquisition of GoMedigap remains at $0.60 per diluted share, non-GAAP net income per diluted share(d) is expected to be in the range of $1.86 to $2.06 per share.

(a)
Adjusted EBITDA is calculated by adding stock-based compensation, change in fair value of earnout liability, depreciation and amortization expense, amortization of intangible assets, other income, net, and provision for income taxes to GAAP net income.
(b)
Segment profit is calculated as revenue for the applicable segment less Marketing and Advertising, Customer Care and Enrollment, Technology and Content and General and Administrative operating expenses, excluding stock-based compensation, change in fair value of earnout liability, depreciation and amortization expense and amortization of intangible assets, that are directly attributable to the applicable segment and other indirect Marketing and Advertising, Customer Care and Enrollment and Technology and Content operating expenses, excluding stock-based compensation, depreciation and amortization expense and amortization of intangible assets, allocated to the applicable segment based on usage.
(c)
Corporate consists of other indirect General and Administrative operating expenses, excluding stock-based compensation and depreciation and amortization expense, which are managed in a corporate shared services environment and, since they are not the responsibility of segment operating management, are not allocated to the reportable segments.
(d)
Non-GAAP net income per diluted share is calculated by adding stock-based compensation expense per diluted share, change in fair value of earnout liability per diluted share, intangible asset amortization expense per diluted share and the income tax effect of these non-GAAP adjustments to GAAP net income per diluted share.

Webcast and Conference Call Information

A Webcast and conference call will be held today, Thursday, October 24, 2019 at 5:00 p.m. Eastern / 2:00 p.m. Pacific Time.  The Webcast will be available live on the Investor Relations section on eHealth’s website at http://ir.ehealthinsurance.com. Individuals interested in listening to the conference call may do so by dialing (877) 930-8066 for domestic callers and (253) 336-8042 for international callers. The participant passcode is 6089464. A telephone replay will be available two hours following the conclusion of the call for a period of seven days and can be accessed by dialing (855) 859-2056 for domestic callers and (404) 537-3406 for international callers. The call ID for the replay is 6089464. The live and archived webcast of the call will also be available on eHealth's website at http://www.ehealthinsurance.com under the Investor Relations section.

About eHealth, Inc.

eHealth, Inc. (NASDAQ: EHTH) operates eHealth.com, a leading private online health insurance exchange where individuals, families and small businesses can compare health insurance products from leading insurers side by side and purchase and enroll in coverage online. eHealth offers thousands of individual, family and small business health plans underwritten by many of the nation's leading health insurance companies. eHealth (through its subsidiaries) is licensed to sell health insurance in all 50 states and the District of Columbia. eHealth also offers educational resources and powerful online and pharmacy-based tools to help Medicare beneficiaries navigate Medicare health insurance options, choose the right plan and enroll in select plans online through PlanPrescriber.com (www.PlanPrescriber.com), eHealthMedicare.com (www.eHealthMedicare.com), Medicare.com (www.Medicare.com) and GoMedigap.com (www.GoMedigap.com).








Forward-Looking Statements

This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. These include statements regarding our expected growth in 2019, our ability to meet the high end of our 2019 revenue and adjusted EBITDA forecast, the quality and scale of our call center resources, the acceleration of our online enrollments, strength of consumer demand, our estimates regarding total membership, Medicare membership, Individual and Family plan membership and ancillary and small business membership, our estimates regarding constrained lifetime values of commissions per member and constraints on lifetime value by product category, and our revised guidance for the full year ending December 31, 2019, including our guidance for total revenue and revenue from our Medicare segment and our Individual, Family and Small Business segment, GAAP net income per diluted share and Non-GAAP net income per diluted share, GAAP net income, Adjusted EBITDA, profit from our Medicare segment and our Individual, Family and Small Business segment, Corporate shared service expense, cash used in operations and cash used for capital expenditures.

These forward-looking statements are inherently subject to various risks and uncertainties that could cause actual results to differ materially from the statements made. In particular, we are required by the revenue recognition standard to make numerous assumptions that are based on historical trends and our management’s judgment. These assumptions may change over time and have a material impact on our revenue recognition, guidance, and results of operations. Please review the assumptions stated in this press release carefully.

The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include our ability to retain existing members and enroll new members during the annual healthcare open enrollment period and Medicare annual enrollment period; the impact of the annual enrollment period on the purchase of individual and family health insurance and its timing on our recognition of revenue; changes in laws and regulations, including in connection with healthcare reform or with respect to the marketing and sale of Medicare plans; the success of our sale of short-term health insurance; our ability to comply with CMS guidance and the impact on conversion rates from federal exchange changes to enrollment; competition, including competition from government-run health insurance exchanges; the seasonality of our business and the fluctuation of our operating results; changes in consumer behaviors and their selection of individual and family health insurance products, including the selection of products for which we receive lower commissions; changes in product offerings among carriers on our ecommerce platform and the resulting impact on our commission revenue; carriers exiting the market of selling individual and family health insurance and the resulting impact on our supply and commission revenue; our ability to execute on our growth strategy in the Medicare and small business health insurance markets; exposure to security risks and our ability to safeguard the security and privacy of confidential data; the impact of increased health insurance costs on demand; our ability to timely receive and accurately predict the amount of commission payments from health insurance carriers; medical loss ratio requirements; our ability to accurately estimate membership and lifetime value of commissions; our relationships with health insurance carriers; customer concentration and consolidation of the health insurance industry; our success in marketing and selling health insurance plans and our unit cost of acquisition; our ability to hire, train and retain licensed health insurance agents and other employees; the need for health insurance carrier and regulatory approvals in connection with the marketing of Medicare-related insurance products; costs of acquiring new members; scalability of the Medicare business; consumer satisfaction of our service; changes in member conversion rates and our ability to attract and convert online visitors into paying members; changes in commission rates; our ability to sell qualified health insurance plans to subsidy-eligible individuals and to enroll subsidy-eligible individuals through government-run health insurance exchanges; our ability to maintain and enhance our brand identity; our ability to derive desired benefits from investments in our business, including membership growth initiatives; reliance on marketing partners; the impact of our direct-to-consumer email, telephone and television marketing efforts; timing of receipt and accuracy of commission reports; payment practices of health insurance carriers; our ability to successfully make and integrate acquisitions; dependence on our operations in China; the restrictions in our debt obligations; compliance with insurance and other laws and regulations; and the performance, reliability and availability of our ecommerce platform and underlying network infrastructure.  Other factors that could cause operating, financial and other results to differ are described in eHealth’s most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K filed with the Securities and Exchange Commission and available on the investor relations page of eHealth’s website at http://www.ehealthinsurance.com and on the Securities and Exchange Commission’s website at www.sec.gov.

All forward-looking statements in this press release are based on information available to eHealth as of the date hereof, and eHealth does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.







Non-GAAP Financial Information

This press release includes financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). To supplement eHealth’s condensed consolidated financial statements presented in accordance with GAAP, eHealth presents investors with certain non-GAAP financial measures, including non-GAAP operating income (loss); non-GAAP operating margins; non-GAAP net income (loss); non-GAAP net income (loss) per diluted share; and adjusted EBITDA.

Non-GAAP operating income (loss) consists of GAAP operating income (loss) excluding the following items:
the effects of expensing stock-based compensation related to stock options and restricted stock units,
change in fair value of earnout liability,
acquisition costs,
restructuring charges, and
amortization of intangible assets.

Non-GAAP operating margins are calculated by dividing non-GAAP operating income (loss) by GAAP total revenue.

Non-GAAP net income (loss) consists of GAAP net income (loss) excluding the following items:
the effects of expensing stock-based compensation related to stock options and restricted stock units,
change in fair value of earnout liability,
acquisition costs,
restructuring charges,
amortization of intangible assets, and
the income tax impact of non-GAAP adjustments.

Non-GAAP net income (loss) per diluted share consists of GAAP net income (loss) per diluted share excluding the following items:
the effects of expensing stock-based compensation related to stock options and restricted stock units per diluted share,
change in fair value of earnout liability per diluted share,
acquisition costs per diluted share,
restructuring charges per diluted share,
amortization of intangible assets per diluted share, and
the income tax impact of non-GAAP adjustments per diluted share.

Adjusted EBITDA is calculated by adding stock-based compensation, change in fair value of earnout liability, depreciation and amortization expense, acquisition costs, restructuring charges, amortization of intangible assets, other income (expense), net and provision (benefit) for income taxes to GAAP net income (loss).

eHealth believes that the presentation of these non-GAAP financial measures provides important supplemental information to management and investors regarding financial and business trends relating to eHealth’s financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provides consistency and comparability with eHealth’s past financial reports. Management also believes that the items described above provides an additional measure of eHealth’s operating results and facilitates comparisons of eHealth’s core operating performance against prior periods and business model objectives. This information is provided to investors in order to facilitate additional analyses of past, present and future operating performance and as a supplemental means to evaluate eHealth’s ongoing operations. eHealth believes that these non-GAAP financial measures are useful to investors in their assessment of eHealth’s operating performance.

Non-GAAP operating income (loss), non-GAAP operating margins, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share and Adjusted EBITDA are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures used in this press release have limitations in that they do not reflect all of the revenue and costs associated with the operations of eHealth’s business and do not reflect income tax as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of eHealth’s results as reported under GAAP. eHealth expects to continue to incur the stock-based compensation costs and purchased intangible asset amortization costs described above, and exclusion of these costs, and their related income tax benefits, from non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent. eHealth compensates for these limitations by prominently disclosing GAAP operating income (loss), GAAP operating margins, GAAP net income (loss) and GAAP net






income (loss) per diluted share and providing investors with reconciliations from eHealth’s GAAP operating results to the non-GAAP financial measures for the relevant periods.

The accompanying tables provide more details on the GAAP financial measures that are most directly comparable to the non-GAAP financial measures described above and the related reconciliations between these financial measures.

Investor Relations Contact

Kate Sidorovich, CFA
Vice President, Investor Relations
2625 Augustine Drive, Second Floor
Santa Clara, CA, 95054
650-210-3111
kate.sidorovich@ehealth.com
http://ir.ehealthinsurance.com

(Tables to Follow)








EHEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

 
September 30, 2019
 
December 31, 2018
Assets
(Unaudited)
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
88,070

 
$
13,089

Accounts receivable
682

 
3,601

Commissions receivable — current
127,414

 
134,190

Prepaid expenses and other current assets
18,180

 
5,288

Total current assets
234,346

 
156,168

Commissions receivable — non-current
230,322

 
211,668

Property and equipment, net
10,401

 
7,684

Operating lease right-of-use assets
36,551

 

Restricted cash
3,354

 

Other assets
15,424

 
11,276

Intangible assets, net
10,609

 
12,249

Goodwill
40,233

 
40,233

Total assets
$
581,240

 
$
439,278

Liabilities and stockholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
18,062

 
$
5,688

Accrued compensation and benefits
18,139

 
20,763

Accrued marketing expenses
4,086

 
11,013

Earnout liability — current
28,300

 
20,730

Lease liabilities — current
4,317

 

Deferred Revenue
9,083

 
876

Other current liabilities
1,671

 
1,549

Total current liabilities
83,658

 
60,619

Debt

 
5,000

Earnout liability — non-current

 
19,270

Deferred income taxes — non-current
29,735

 
47,901

Lease liabilities — non-current
34,181

 

Other non-current liabilities
2,095

 
3,339

Stockholders’ equity:
 
 
 
Common stock
35

 
31

Additional paid-in capital
448,409

 
298,024

Treasury stock, at cost
(199,998
)
 
(199,998
)
Retained earnings
183,028

 
204,965

Accumulated other comprehensive income
97

 
127

Total stockholders’ equity
431,571

 
303,149

Total liabilities and stockholders’ equity
$
581,240

 
$
439,278








EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Revenue:
 
 
 
 
 
 
 
Commission
$
59,762

 
$
33,613

 
$
184,595

 
$
104,966

Other
10,151

 
7,138

 
19,858

 
11,512

Total revenue
69,913

 
40,751

 
204,453

 
116,478

Operating costs and expenses (1):
 
 
 
 
 
 
 
Cost of revenue
410

 
170

 
782

 
473

Marketing and advertising
25,812

 
16,148

 
72,857

 
45,756

Customer care and enrollment
40,144

 
17,272

 
81,567

 
43,730

Technology and content
12,033

 
7,740

 
31,487

 
23,368

General and administrative
16,608

 
10,528

 
42,748

 
32,459

Acquisition costs

 

 

 
76

Change in fair value of earnout liability
(5,400
)
 
3,800

 
15,106

 
6,300

Restructuring charges

 

 

 
1,865

Amortization of intangible assets
547

 
547

 
1,641

 
1,545

Total operating costs and expenses
90,154

 
56,205

 
246,188

 
155,572

Loss from operations
(20,241
)
 
(15,454
)
 
(41,735
)
 
(39,094
)
Other income, net
568

 
296

 
1,824

 
776

Loss before benefit from income taxes
(19,673
)
 
(15,158
)
 
(39,911
)
 
(38,318
)
Benefit from income taxes
(8,649
)
 
(6,186
)
 
(17,974
)
 
(12,487
)
Net loss
$
(11,024
)
 
$
(8,972
)
 
$
(21,937
)
 
$
(25,831
)
 
 
 
 
 
 
 
 
Net loss per share:
 
 
 
 
 
 
 

Basic and diluted
$
(0.47
)
 
$
(0.47
)
 
$
(0.96
)
 
$
(1.36
)
 
 
 
 
 
 
 
 
Weighted-average number of shares used in per share amounts:
 
 
 
 
 
 
 

Basic and diluted
23,493

 
19,236

 
22,840

 
19,059

 
 
 
 
 
 
 
 
(1) Includes stock-based compensation as follows:
 
 
 
 
 
 
 
Marketing and advertising
$
872

 
$
545

 
$
2,212

 
$
1,477

Customer care and enrollment
369

 
194

 
927

 
565

Technology and content
729

 
388

 
1,946

 
1,115

General and administrative
3,540

 
2,416

 
8,332

 
6,067

Restructuring charges

 

 

 
251

Total stock-based compensation expense
$
5,510

 
$
3,543

 
$
13,417

 
$
9,475







EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
    
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Operating activities
 
 
 
 
 
 
 
Net loss
$
(11,024
)
 
$
(8,972
)
 
$
(21,937
)
 
$
(25,831
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
 
 
 
 
 
 
 
Deferred income taxes
(8,631
)
 
(6,197
)
 
(18,166
)
 
(12,679
)
Depreciation and amortization
765

 
620

 
2,153

 
1,870

Amortization of internally developed software
930

 
572

 
2,443

 
1,583

Amortization of intangible assets
547

 
547

 
1,641

 
1,545

Stock-based compensation expense
5,510

 
3,543

 
13,417

 
9,475

Change in fair value of earnout liability
(5,400
)
 
3,800

 
15,106

 
6,300

Change in deferred rent

 
12

 
(1,272
)
 
326

Other non-cash items
112

 
(1
)
 
336

 
61

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
377

 
(1,294
)
 
2,920

 
(665
)
Commissions receivable
(16,321
)
 
1,661

 
(11,878
)
 
29,156

Prepaid expenses and other assets
(6,650
)
 
(7,089
)
 
(9,346
)
 
(8,209
)
Accounts payable
13,008

 
2,715

 
13,155

 
1,513

Accrued compensation and benefits
2,874

 
1,517

 
(2,624
)
 
(2,081
)
Accrued marketing expenses
415

 
316

 
(6,927
)
 
(1,635
)
Deferred revenue
8,325

 
4,978

 
8,207

 
5,354

Accrued expenses and other liabilities
(776
)
 
(1,676
)
 
(1,942
)
 
(595
)
Net cash (used in) provided by operating activities
(15,939
)
 
(4,948
)
 
(14,714
)
 
5,488

Investing activities
 
 
 
 
 
 
 
Capitalized internal-use software and website development costs
(2,923
)
 
(1,581
)
 
(6,356
)
 
(4,344
)
Purchases of property and equipment and other assets
(1,830
)
 
(2,349
)
 
(5,616
)
 
(3,471
)
Payments for security deposits
824

 

 
(72
)
 

Acquisition of business, net of cash acquired

 

 

 
(14,929
)
Cash used in investing activities
(3,929
)
 
(3,930
)
 
(12,044
)
 
(22,744
)
Financing activities
 
 
 
 
 
 
 
Proceeds from issuance of common stock, net of issuance costs

 

 
126,051

 

Net proceeds from exercise of common stock options
1,913

 
1,362

 
5,168

 
2,030

Cash used to net-share settle equity awards
(8,059
)
 
(1,656
)
 
(11,511
)
 
(3,398
)
Debt issuance cost payments

 
(1,172
)
 

 
(1,172
)
Repayment of debt

 

 
(5,000
)
 

Acquisition-related contingent payments

 

 
(9,542
)
 

Principal payments in connection with finance leases
(31
)
 
(26
)
 
(81
)
 
(78
)
Net cash (used in) provided by financing activities
(6,177
)
 
(1,492
)
 
105,085

 
(2,618
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(21
)
 
(56
)
 
8

 
(71
)
Net (decrease) increase in cash, cash equivalents and restricted cash
(26,066
)
 
(10,426
)
 
78,335

 
(19,945
)
Cash, cash equivalents and restricted cash at beginning of period
117,490

 
30,774

 
13,089

 
40,293

Cash, cash equivalents and restricted cash at end of period (1)
$
91,424

 
$
20,348

 
$
91,424

 
$
20,348


(1) The ending balance of cash, cash equivalents and restricted cash included $3.4 million of restricted cash as of September 30, 2019. There was no restricted cash as of December 31, 2018.






EHEALTH, INC.
SEGMENT INFORMATION
(In thousands, unaudited)

 
Three Months Ended September 30,
 
 
 
Nine Months Ended September 30,
 
 
 
2019
 
2018
 
Percent
Change
 
2019
 
2018
 
Percent
Change
Revenue
 
 
 
 
 
 
 
 
 
 
 
Medicare (1)
$
57,189

 
$
32,733

 
75
 %
 
$
164,357

 
$
88,964

 
85
 %
Individual, Family and Small Business (2)
12,724

 
8,018

 
59
 %
 
40,096

 
27,514

 
46
 %
Total revenue
$
69,913

 
$
40,751

 
72
 %
 
$
204,453

 
$
116,478

 
76
 %
 
 
 
 
 
 
 
 
 
 
 
 
Segment profit (loss)
 
 
 
 
 
 
 
 
 
 
 
Medicare segment profit (loss) (3)
$
(11,004
)
 
$
467

 
(2,456
)%
 
$
5,917

 
$
2,174

 
172
 %
Individual, Family and Small Business segment profit (loss) (3)
3,753

 
(579
)
 
748
 %
 
15,045

 
2,292

 
556
 %
Total segment profit (loss)
(7,251
)
 
(112
)
 
(6,374
)%
 
20,962

 
4,466

 
369
 %
Corporate (4)
(11,568
)
 
(6,832
)
 
69
 %
 
(30,380
)
 
(22,680
)
 
34
 %
Stock-based compensation expense
(5,510
)
 
(3,543
)
 
56
 %
 
(13,417
)
 
(9,224
)
 
45
 %
Depreciation and amortization
(765
)
 
(620
)
 
23
 %
 
(2,153
)
 
(1,870
)
 
15
 %
Acquisition costs

 

 
 %
 

 
(76
)
 
(100
)%
Change in fair value of earnout liability
5,400

 
(3,800
)
 
(242
)%
 
(15,106
)
 
(6,300
)
 
140
 %
Restructuring charges

 

 
 %
 

 
(1,865
)
 
(100
)%
Amortization of intangible assets
(547
)
 
(547
)
 
 %
 
(1,641
)
 
(1,545
)
 
6
 %
Other income, net
568

 
296

 
92
 %
 
1,824

 
776

 
135
 %
Loss before benefit from income taxes
$
(19,673
)
 
$
(15,158
)
 
30
 %
 
$
(39,911
)
 
$
(38,318
)
 
4
 %

Segment Information

We evaluate our business performance and manage our operations as two distinct reporting segments:
Medicare; and
Individual, Family and Small Business.
(1)
The Medicare segment consists primarily of amounts earned from our sale of Medicare-related health insurance plans, including Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans, and to a lesser extent, ancillary products sold to our Medicare-eligible customers, including but not limited to, dental and vision, our advertising program that allows Medicare-related carriers to purchase advertising on a separate website developed, hosted and maintained by us, and our delivery and sale to third parties of Medicare-related health insurance leads generated by our ecommerce platforms and our marketing activities.
(2)
The Individual, Family and Small Business segment consists primarily of amounts earned from our sale of individual, family and small business health insurance plans and ancillary products sold to our non-Medicare-eligible customers, including but not limited to, dental, vision, and short-term insurance. To a lesser extent, the Individual, Family and Small Business segment consists of amounts earned from our online sponsorship program that allows carriers to purchase advertising space in specific markets in a sponsorship area on our website, our licensing to third parties the use of our health insurance ecommerce technology, and our delivery and sale to third parties of individual and family health insurance leads generated by our ecommerce platforms and our marketing activities.
(3)
Segment profit (loss) is calculated as revenue for the applicable segment less marketing and advertising, customer care and enrollment, technology and content and general and administrative operating expenses, excluding stock-based compensation, depreciation and amortization expense, acquisition costs, change in fair value of earnout liability, restructuring charges and amortization of intangible assets, that are directly attributable to the applicable segment and other indirect marketing and advertising, customer care and enrollment and technology and content operating expenses, excluding stock-based compensation, depreciation and amortization expense and amortization of intangible assets, allocated to the applicable segment based on usage.
(4)
Corporate consists of other indirect general and administrative operating expenses, excluding stock-based compensation, depreciation and amortization expense, which are managed in a corporate shared services environment and, because they are not the responsibility of segment operating management, are not allocated to the reportable segments.







EHEALTH, INC.
SUMMARY OF SELECTED METRICS
COMMISSION REVENUE BY PRODUCT
(In thousands, unaudited)

 
 
Three Months Ended September 30,
 
 
 
Nine Months Ended September 30,
 
 
 
 
2019
 
2018
 
Percent
Change
 
2019
 
2018
 
Percent
Change
Medicare
 
 
 
 
 
 
 
 
 
 
 
 
Medicare Advantage
 
$
36,735

 
$
17,976

 
104
 %
 
$
113,185

 
$
57,649

 
96
 %
Medicare Supplement
 
8,229

 
7,358

 
12
 %
 
25,082

 
18,305

 
37
 %
Medicare Part D
 
1,805

 
1,005

 
80
 %
 
5,906

 
2,879

 
105
 %
Total Medicare
 
46,769

 
26,339

 
78
 %
 
144,173

 
78,833

 
83
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Individual and Family (1)
 
 
 
 
 


 
 
 
 
 
 
Non-Qualified Health Plans
 
3,146

 
876

 
259
 %
 
11,592

 
3,386

 
242
 %
Qualified Health Plans
 
839

 
1,169

 
(28
)%
 
4,900

 
5,006

 
(2
)%
Total Individual and Family
 
3,985

 
2,045

 
95
 %
 
16,492

 
8,392

 
97
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Ancillaries
 
 
 
 
 
 
 
 
 
 
 
 
Short-term
 
3,151

 
1,699

 
85
 %
 
7,162

 
4,242

 
69
 %
Dental
 
1,420

 
245

 
480
 %
 
3,138

 
1,611

 
95
 %
Vision
 
537

 
126

 
326
 %
 
1,294

 
857

 
51
 %
Other
 
1,104

 
1,006

 
10
 %
 
2,778

 
3,659

 
(24
)%
Total Ancillaries
 
6,212

 
3,076

 
102
 %
 
14,372

 
10,369

 
39
 %
 
 
 
 
 
 


 
 
 
 
 
 
Small Business
 
1,938

 
1,697

 
14
 %
 
6,576

 
5,828

 
13
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Commission Bonus
 
858

 
456

 
88
 %
 
2,982

 
1,544

 
93
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Commission Revenue
 
$
59,762

 
$
33,613

 
78
 %
 
$
184,595

 
$
104,966

 
76
 %

(1)
We define our individual and family plan offerings as major medical individual and family health insurance plans, which does not include Medicare-related, small business or ancillary plans. Individual and family health insurance plans include both qualified and non-qualified plans. Qualified health plans are individual and family health insurance plans that meet the requirements of the Affordable Care Act and are offered through the government-run health insurance exchange in the relevant jurisdiction. Non-qualified health plans are individual and family health insurance plans that meet the requirements of the Affordable Care Act and are not offered through the exchange in the relevant jurisdiction. Individuals that purchase non-qualified health plans cannot receive a subsidy in connection with the purchase of those plans.







EHEALTH, INC.
SUMMARY OF SELECTED METRICS
SUBMITTED APPLICATIONS
(Unaudited)

 
 
Three Months Ended September 30,
 
 
 
Nine Months Ended September 30,
 
 
 
 
2019
 
2018
 
Percent Change
 
2019
 
2018
 
Percent Change
Medicare (1)
 
 
 
 
 
 
 
 
 
 
 
 
Medicare Advantage (2)
 
37,915

 
21,115

 
80
 %
 
120,855

 
69,060

 
75
 %
Medicare Supplement (2)
 
11,099

 
8,924

 
24
 %
 
31,936

 
22,180

 
44
 %
Medicare Part D
 
7,422

 
3,863

 
92
 %
 
23,979

 
11,447

 
109
 %
Total Medicare
 
56,436

 
33,902

 
66
 %
 
176,770

 
102,687

 
72
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Individual and Family (3)
 
 
 
 
 
 
 
 
 
 
 
 
Non-Qualified Health Plans
 
3,131

 
1,224

 
156
 %
 
8,343

 
6,419

 
30
 %
Qualified Health Plans
 
1,248

 
438

 
185
 %
 
3,534

 
4,159

 
(15
)%
Total Individual and Family
 
4,379

 
1,662

 
163
 %
 
11,877

 
10,578

 
12
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Ancillaries (4)
 
 
 
 
 
 
 
 
 
 
 
 
Short-term
 
13,977

 
30,365

 
(54
)%
 
42,442

 
75,639

 
(44
)%
Dental
 
8,609

 
9,111

 
(6
)%
 
28,972

 
31,428

 
(8
)%
Vision
 
3,654

 
4,318

 
(15
)%
 
13,245

 
14,111

 
(6
)%
Other
 
5,871

 
10,641

 
(45
)%
 
18,612

 
32,759

 
(43
)%
Total Ancillaries
 
32,111

 
54,435

 
(41
)%
 
103,271

 
153,937

 
(33
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Small Business (5)
 
1,566

 
1,843

 
(15
)%
 
5,348

 
5,235

 
2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Submitted Applications
 
94,492

 
91,842

 
3
 %
 
297,266

 
272,437

 
9
 %

Submitted Applications

Applications are counted as submitted when the applicant completes the application and either clicks the submit button on our website or provides verbal authorization to submit the application. The applicant may have additional actions to take before the application will be reviewed by the insurance carrier, such as providing additional information. In addition, an applicant may submit more than one application.

(1)
Medicare-related health insurance applications submitted on our website or through our customer care center during the period, including Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans.
(2)
The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform increased from 9% for the three months ended September 30, 2018 to 21% for the three months ended September 30, 2019. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform increased from 8% for the nine months ended September 30, 2018 to 15% for the nine months ended September 30, 2019.
(3)
Major medical individual and family plan ("IFP") health insurance applications submitted on our website during the period. An applicant may submit more than one application. We define our IFP offerings as major medical individual and family health insurance plans, which does not include Medicare-related, small business or ancillary plans.
(4)
Ancillaries consists primarily of short-term, dental and vision insurance plans submitted on our website during the period.
(5)
Applications for small business health insurance are counted as submitted when the applicant completes the application, the employees complete their applications, the applicant submits the application to us and we submit the application to the carrier.






EHEALTH, INC.
SUMMARY OF SELECTED METRICS
APPROVED MEMBERS
(Unaudited)

 
 
Three Months Ended September 30,
 
 
 
Nine Months Ended September 30,
 
 
 
 
2019
 
2018
 
Percent Change
 
2019
 
2018
 
Percent Change
Medicare
 
 
 
 
 
 
 
 
 
 
 
 
Medicare Advantage
 
35,171

 
19,664

 
79
 %
 
112,488

 
65,102

 
73
 %
Medicare Supplement
 
9,110

 
6,985

 
30
 %
 
26,510

 
17,667

 
50
 %
Medicare Part D
 
6,933

 
3,511

 
97
 %
 
22,684

 
11,230

 
102
 %
Total Medicare
 
51,214

 
30,160

 
70
 %
 
161,682

 
93,999

 
72
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Individual and Family
 
 
 
 
 
 
 
 
 
 
 
 
Non-Qualified Health Plans
 
2,245

 
1,227

 
83
 %
 
10,250

 
11,715

 
(13
)%
Qualified Health Plans
 
942

 
583

 
62
 %
 
7,389

 
16,483

 
(55
)%
Total Individual and Family
 
3,187

 
1,810

 
76
 %
 
17,639

 
28,198

 
(37
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Ancillaries
 
 
 
 
 
 
 
 
 
 
 
 
Short-term
 
15,630

 
32,723

 
(52
)%
 
44,691

 
79,683

 
(44
)%
Dental
 
9,487

 
9,256

 
2
 %
 
32,021

 
32,720

 
(2
)%
Vision
 
4,265

 
4,539

 
(6
)%
 
15,108

 
15,578

 
(3
)%
Other
 
6,296

 
8,716

 
(28
)%
 
17,654

 
25,447

 
(31
)%
   Total Ancillaries
 
35,678

 
55,234

 
(35
)%
 
109,474

 
153,428

 
(29
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Small Business
 
2,871

 
3,255

 
(12
)%
 
10,368

 
12,013

 
(14
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Approved Members
 
92,950

 
90,459

 
3
 %
 
299,163

 
287,638

 
4
 %

Approved Members
Approved members represents the number of individuals on submitted applications that were approved by the relevant insurance carrier for the identified product during the relevant period. Approved members may not pay for their plan and become paying members.









EHEALTH, INC.
SUMMARY OF SELECTED METRICS
ESTIMATED MEMBERSHIP
(Unaudited)

 
As of September 30,
 
 
 
2019
 
2018
 
Percent Change
Medicare (1)
 
 
 
 
 
Medicare Advantage
309,180

 
235,269

 
31
 %
Medicare Supplement
85,821

 
64,632

 
33
 %
Medicare Part D
156,067

 
109,987

 
42
 %
Total Medicare
551,068

 
409,888

 
34
 %
 
 
 
 
 
 
Individual and Family (2)
131,058

 
161,371

 
(19
)%
 
 
 
 
 
 
Ancillaries (3)
 
 
 
 
 
Short-term
24,167

 
25,008

 
(3
)%
Dental
131,409

 
142,990

 
(8
)%
Vision
72,765

 
71,875

 
1
 %
Other
36,014

 
38,380

 
(6
)%
Total Ancillaries
264,355

 
278,253

 
(5
)%
 
 
 
 
 
 
Small Business (4)
44,723

 
38,296

 
17
 %
 
 
 
 
 
 
Total Estimated Membership
991,204

 
887,808

 
12
 %

Estimated Membership
Estimated membership represents the estimated number of members active as of the date indicated based on the number of members for whom we have received or applied a commission payment during the month of estimation.
(1)
For Medicare-related health insurance plans, we take the sum of (i) the number of members for whom we have received or applied a commission payment for a month that is up to two months prior to the date of estimation (after reducing that number using historical experience for assumed member cancellations over the period being estimated); and (ii) the number of approved members over that period (after reducing that number using historical experience for an assumed number of members who do not accept their approved policy from the same month of the previous year and for estimated member cancellations through the date of the estimate). To the extent we determine we have received substantially all of the commission payments related to a given month during the period being estimated, we will take the number of members for whom we have received or applied a commission payment during the month of estimation. The estimated number of members active on Medicare-related health insurance as of the date indicated is based on the number of members for whom we have received or applied a commission payment during the month of estimation.
(2)
To estimate the number of members on individual and family health insurance plans, we take the sum of (i) the number of IFP members for whom we have received or applied a commission payment for a month that is up to six months prior to the date of estimation (after reducing that number using historical experience for assumed member cancellations over the period being estimated); and (ii) the number of approved members over that period (after reducing that number by the percentage of members who do not accept their approved policy from the same month of the previous year for estimated member cancellations through the date of the estimate). To the extent we determine we have received substantially all of the commission payments related to a given month during the period being estimated, we will take the number of members for whom we have received or applied a commission payment during the month of estimation. For IFP health insurance plans, a member who purchases and is active on multiple standalone insurance plans will be counted as a member more than once. For example, a member who is active on both an individual and family health insurance plan and a standalone dental plan will be counted as two continuing members.











EHEALTH, INC.
SUMMARY OF SELECTED METRICS
ESTIMATED MEMBERSHIP (Continued)
(Unaudited)

(3)
For ancillary health insurance plans (such as short-term, dental and vision insurance), we take the sum of (i) the number of members for whom we have received or applied a commission payment for a month that is up to three months prior to the date of estimation (after reducing that number using historical experience for assumed member cancellations over the period being estimated); and (ii) the number of approved members over that period (after reducing that number using historical experience for an assumed number of members who do not accept their approved policy from the same month of the previous year and for estimated member cancellations through the date of the estimate). To the extent we determine we have received substantially all of the commission payments related to a given month during the period being estimated, we will take the number of members for whom we have received or applied a commission payment during the month of estimation. The one to three-month period varies by insurance product and is largely dependent upon the timeliness of commission payment and related reporting from the related carriers.
(4)
For small business health insurance plans, we estimate the number of members using the number of initial members at the time the group is approved, and we update this number for changes in membership if such changes are reported to us by the group or carrier in the period it is reported. However, groups generally notify the carrier directly of policy cancellations and increases or decreases in group size without informing us. Health insurance carriers often do not communicate policy cancellation information or group size changes to us. We often are made aware of policy cancellations and group size changes at the time of annual renewal and update our membership statistics accordingly in the period they are reported.

Health insurance carriers bill and collect insurance premiums paid by our members. The carriers do not report to us the number of members that we have as of a given date. The majority of our members who terminate their policies do so by discontinuing their premium payments to the carrier and do not inform us of the cancellation. Also, some of our members pay their premiums less frequently than monthly. Given the number of months required to observe non-payment of commissions in order to confirm cancellations, we estimate the number of members who are active on insurance policies as of a specified date.
After we have estimated membership for a period, we may receive information from health insurance carriers that would have impacted the estimate if we had received the information prior to the date of estimation. We may receive commission payments or other information that indicates that a member who was not included in our estimates for a prior period was in fact an active member at that time, or that a member who was included in our estimates was in fact not an active member of ours. For instance, we reconcile information carriers provide to us and may determine that we were not historically paid commissions owed to us, which would cause us to have underestimated membership. Conversely, carriers may require us to return commission payments paid in a prior period due to policy cancellations for members we previously estimated as being active. We do not update our estimated membership numbers reported in previous periods. Instead, we reflect updated information regarding our historical membership in the membership estimate for the current period. As a result of the delay in our receipt of information from insurance carriers, actual trends in our membership are most discernible over periods longer than from one quarter to the next. As a result of the delay we experience in receiving information about our membership, it is difficult for us to determine with any certainty the impact of current conditions on our membership retention. Healthcare reform and its impacts as well as other factors could cause the assumptions and estimates that we make in connection with estimating our membership to be inaccurate, which would cause our membership estimates to be inaccurate.







EHEALTH, INC.
SUMMARY OF SELECTED METRICS
CONSTRAINED LIFETIME VALUE OF
COMMISSIONS PER APPROVED MEMBER
(Unaudited)

 
Three Months Ended September 30,
 
 
 
2019
 
2018
 
Percent Change
Medicare
 
 
 
 
 
Medicare Advantage (1)
$
923

 
$
914

 
1
 %
Medicare Supplement (1)
$
951

 
$
1,058

 
(10
)%
Medicare Part D (1)
$
265

 
$
286

 
(7
)%
 
 
 
 
 
 
Individual and Family
 
 
 
 
 
Non-Qualified Health Plans (1)
$
173

 
$
119

 
45
 %
Qualified Health Plans (1)
$
165

 
$
115

 
43
 %
 
 
 
 
 
 
Ancillaries
 
 
 
 
 
Short-term (1)
$
112

 
$
55

 
104
 %
Dental (1)
$
65

 
$
62

 
5
 %
Vision (1)
$
45

 
$
47

 
(4
)%
 
 
 
 
 
 
Small Business (2)
$
168

 
$
163

 
3
 %

Constrained Lifetime Value of Commissions Per Approved Member
(1)
Constrained lifetime value (“LTV”) of commissions per approved member represents commissions estimated to be collected over the estimated life of an approved member’s policy after applying constraints in accordance with our revenue recognition policy. The estimate is driven by multiple factors, including but not limited to, contracted commission rates, carrier mix, expected plan duration and applied constraints. These factors may result in varying values from period to period.
(2)
For small business, the amount represents the estimated commissions we expect to collect from the plan over the following twelve months. The estimate is driven by multiple factors, including but not limited to, contracted commission rates, carrier mix, expected plan duration and applied constraints. These factors may result in varying values from period to period.










EHEALTH, INC.
SUMMARY OF SELECTED METRICS
CONSTRAINTS ON LIFETIME VALUE
OF COMMISSIONS PER APPROVED MEMBER
(Unaudited)

 
Three and Nine Months Ended September 30,
 
2019
 
2018
Medicare
 
 
 
Medicare Advantage
7
%
 
7
%
Medicare Supplement
5
%
 
5
%
Medicare Part D
5
%
 
5
%
 
 
 
 
Individual and Family
 
 
 
Non-Qualified Health Plans
15
%
 
15
%
Qualified Health Plans
20
%
 
20
%
 
 
 
 
Ancillaries
10
%
 
10
%
 
 
 
 
Small Business
%
 
%

Constraints on Lifetime Value of Commissions Per Approved Member
Constraints are applied to derive LTV of commissions per approved member for revenue recognition in accordance with our revenue recognition policy. The constraints are applied to help ensure that commissions estimated to be collected over the estimated life of an approved member’s plan are recognized as revenue only to the extent that is it probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with future commissions receivable from the plan is subsequently resolved. We evaluate constraints on an annual basis for factors affecting our estimate of LTV of commissions per approved member and apply management judgment to determine the constraints based on current trends impacting our business.






EHEALTH, INC.
SUMMARY OF SELECTED METRICS
EXPENSE METRICS PER APPROVED MEMBER
(Unaudited)

 
Three Months Ended September 30,
 
 
 
2019
 
2018
 
Percent Change
Medicare variable cost per approved member
 
 
 
 
 
Medicare variable marketing cost per approved Medicare Advantage ("MA")-equivalent member (1)
$
381

 
$
356

 
7
%
Medicare customer care and enrollment ("CC&E") cost per approved MA-equivalent member (2)
$
819

 
$
538

 
52
%
  Total Medicare cost per approved member
$
1,200

 
$
894

 
34
%
 
 
 
 
 
 
Individual and Family Plan ("IFP") variable cost per approved member
 
 
 
 
 
IFP variable marketing cost per approved IFP-equivalent member (3)
$
80

 
$
77

 
4
%
IFP CC&E cost per approved IFP-equivalent member (4)
$
167

 
$
97

 
72
%
  Total IFP cost per approved member
$
247

 
$
174

 
42
%

Expense Metrics Per Approved Member

(1)
Variable marketing cost per approved MA-equivalent member represents direct costs incurred in member acquisition for Medicare Advantage, Medicare Supplement and Medicare Part D plans from our direct marketing partners and online advertising channels divided by MA-equivalent approved members in a given period. MA-equivalent members is a derived metric and is equal to the sum of Medicare Part D approved members divided by 4, the number of Medicare Advantage approved members and the number of Medicare Supplement approved members in the given period.
(2)
Medicare CC&E cost per approved MA-equivalent member is equal to the CC&E expense of our Medicare business included in our operating costs divided by MA-equivalent approved members in a given period. MA-equivalent approved members is a derived metric and is equal to the sum of Medicare Part D approved members divided by 4, the number of Medicare Advantage approved members and the number of Medicare Supplement approved members in the given period.
(3)
Variable marketing cost per approved IFP-equivalent member represents direct costs incurred in member acquisition for IFP plans from our direct, marketing partners and online advertising channels divided by IFP-equivalent approved members in a given period. IFP-equivalent approved members is a derived metric and is equal to the sum of the number of short-term approved members divided by 3 and the IFP approved members in the given period.
(4)
IFP CC&E cost per approved IFP-equivalent member is equal to the CC&E expense of our IFP business included in our operating costs divided by IFP-equivalent approved members in a given period. IFP-equivalent approved members is a derived metric and is equal to the sum of the number of short-term approved members divided by 3 and the IFP approved members in the given period.








EHEALTH, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts, unaudited)

 
Three Months Ended September 30,
 
2019
 
2018
 
Amount
 
Percent of Total Revenue
 
Amount
 
Percent of Total Revenue
GAAP marketing and advertising expense
$
25,812

 
37%
 
$
16,148

 
40%
Stock-based compensation expense (1)
(872
)
 
(1)%
 
(545
)
 
(1)%
Non-GAAP marketing and advertising expense
$
24,940

 
36%
 
$
15,603

 
38%
 
 
 
 
 
 
 
 
GAAP customer care and enrollment expense
$
40,144

 
57%
 
$
17,272

 
42%
Stock-based compensation expense (1)
(369
)
 
(1)%
 
(194
)
 
—%
Non-GAAP customer care and enrollment expense
$
39,775

 
57%
 
$
17,078

 
42%
 
 
 
 
 
 
 
 
GAAP technology and content expense
$
12,033

 
17%
 
$
7,740

 
19%
Stock-based compensation expense (1)
(729
)
 
(1)%
 
(388
)
 
(1)%
Non-GAAP technology and content expense
$
11,304

 
16%
 
$
7,352

 
18%
 
 
 
 
 
 
 
 
GAAP general and administrative expense
$
16,608

 
24%
 
$
10,528

 
26%
Stock-based compensation expense (1)
(3,540
)
 
(5)%
 
(2,416
)
 
(6)%
Non-GAAP general and administrative expense
$
13,068

 
19%
 
$
8,112

 
20%
 
 
 
 
 
 
 
 
GAAP operating costs and expenses
$
90,154

 
129%
 
$
56,205

 
138%
Stock-based compensation expense (1)
(5,510
)
 
(8)%
 
(3,543
)
 
(9)%
Change in fair value of earnout liability (2)
5,400

 
8%
 
(3,800
)
 
(9)%
Amortization of intangible assets (3)
(547
)
 
(1)%
 
(547
)
 
(1)%
Non-GAAP operating costs and expenses
$
89,497

 
128%
 
$
48,315

 
119%
 
 
 
 
 
 
 
 
GAAP loss from operations
$
(20,241
)
 
(29)%
 
$
(15,454
)
 
(38)%
Stock-based compensation expense (1)
5,510

 
8%
 
3,543

 
9%
Change in fair value of earnout liability (2)
(5,400
)
 
(8)%
 
3,800

 
9%
Amortization of intangible assets (3)
547

 
1%
 
547

 
1%
Non-GAAP loss from operations
$
(19,584
)
 
(28)%
 
$
(7,564
)
 
(19)%

Explanation of Adjustments
(1)
Non-GAAP loss from operations and non-GAAP expenses exclude the effect of expensing stock-based compensation related to stock options and restricted stock units.
(2)
Non-GAAP operating costs and expenses and non-GAAP loss from operations exclude the change in fair value of earnout liability related to the acquisition of GoMedigap, which was completed in January 2018.
(3)
Non-GAAP operating costs and expenses and non-GAAP loss from operations exclude amortization of intangible assets.














EHEALTH, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts, unaudited)

 
Nine Months Ended September 30,
 
2019
 
2018
 
Amount
 
Percent of Total Revenue
 
Amount
 
Percent of Total Revenue
GAAP marketing and advertising expense
$
72,857

 
36%
 
$
45,756

 
39%
Stock-based compensation expense (1)
(2,212
)
 
(1)%
 
(1,477
)
 
(1)%
Non-GAAP marketing and advertising expense
$
70,645

 
35%
 
$
44,279

 
38%
 
 
 
 
 
 
 
 
GAAP customer care and enrollment expense
$
81,567

 
40%
 
$
43,730

 
38%
Stock-based compensation expense (1)
(927
)